November 5, 2008
I have sold numerous Fixed Indexed Annuities over the last 10 years as annuities. My clients are very pleased with the results of the product and the return on their money. Their money has been secure and has done as advertised. Any additional regulation to over-regulate FIA as a security is overkill and simply not the correct approach to protect the consumer.
The SEC’s draft regulation (rule 151A) adds an unnecessary layer of securities regulation
to this insurance product. Rule 151A would turn most FIA products—as well as some
non-indexed fixed annuities—into securities. This will have far-reaching consequences by
disrupting the manner in which these products are sold today. Thus, causing confusion
over the differences between insurance versus securities and providing little additional
consumer protection at tremendous cost to companies, agents and ultimately clients.
· Proposed rule 151A is ill-conceived. Many securities lawyers find the SEC proposal to
be confusing and completely unsupported by judicial precedents on what makes an
“annuity”exempt from securities laws. Beyond that, it defies common sense that a product
which has virtually no market-related downside risk should be considered a security in
the same manner as mutual funds or variable products which the investor bears the risk
for market losses. Many observers think the SEC’s proposed regulation—if adopted—is a
slippery slope towards reclassifying many other annuity products as securities. This seems
at odds with the Congressional intent.
· FIA products are heavily regulated by state insurance departments. Through the NAIC,
state regulators have worked hard over many years to come up with appropriate suitability
and disclosure requirements for FIA products. To the credit of state insurance regulators,
this work continues today and should not be derailed by the SEC’s unilateral action.
Your consideration for my views is appreciated. Truly, Russell N. Marshall Independent Agent